Today's $250bn merger announcement between Time Warner and America Online provides the most dramatic proof yet of the breakdown of old and new media.
For Time Warner, it has been a steady march from the traditional media of film and print new areas. Gerald Levin, the head of Time Warner brought CNN, the cable network into the Time Warner empire, seeking to cross-fertilise Time Warner's numerous publications with cable TV.
Once thought of a bloodless technophile, Mr Levin has emerged as an audacious dealmaker. In his latest venture, Mr Levin is seeking to catapult Time Warner well and truly into the internet age, tapping the internet expertise of a new media company like AOL to leverage his company's traditional media assets.
Other companies have been moving in this direction, notably Rupert Murdoch's News Corporation. Mr Murdoch became an internet convert towards the end of last year and now wants his company to be at the cutting edge of the internet. His number two, Peter Chernin, is less focused on the company's heart, its newspaper business, than on its fast-growing divisions such as entertainment and the internet.
Last month, Mr Chernin announced a $1bn alliance with Healtheon/WebMD, the online healthcare company. The deal signalled a new trend for traditional companies to leverage their huge marketing power to gain a stake in internet companies. Instead of accepting advertising fees from online groups desperate to increase brand awareness, media companies are demanding a stake in the company in return for space.
As another example of the sort of cross-pollination Mr Chernin has in mind, News Corp plans to start a religious website linked to its Zondervan publishing interests. Mr Chernin also expects TV Guide, the magazine partly owned by News Corp, to rival Yahoo and America Online as a valuable media brand.
Mr Levin has taken the process of convergence to another level altogether, by merging Time Warner with an internet company. Although AOL initially was ridiculed by internet purists, it has established itself as the dominant online service provider with 20m customers, and it boosted its internet credentials with its purchase last year of Netscape, which popularised the internet browser.
By merging operations, Time Warner will have access to AOL's large customer base, while Yahoo will have access to Time Warner's content, which includes films, TV programmes and publications ranging from Time and Sports Illustrated to People and Entertainment Weekly. While other companies such as News Corp were looking at alliances with internet entities, Time Warner has decided to go all the way by throwing its lot in with AOL.
This deal represents the second phase of mergers among media companies. In the first phase media companies merged with each other. Disney set the trend by buying the ABC television network, Viacom bought Paramount, the film studio, Time Warner hopped on the bandwagon and bought CNN. These media companies then entered into alliances with internet companies or formed internet subsidiaries. Now we have a marriage of a traditional media company with an internet company.
On paper, it looks like a sensible idea. Media companies have to position themselves for an era where people will get news not just from print, but from phones, interactive TVs and computers. They need the expertise of a Yahoo! to channel information to these various platforms. The internet companies, for their part, need content for their sites.
Mr Levin has always been a technology buff. He resisted the pressure to get rid of Time Warner's cable assets, which soaked up investment. Now they have become valuable as a way of delivering information. He led the drive for interactive TV, although the experiment fizzled, coming ahead of its time. Now the question is whether he is too far ahead in putting Time Warner and AOL together. Large companies, and the new entity will be a behemoth, are notoriously difficult to run, and the clash of cultures between two companies, has often been difficult to overcome.
